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I'm so close and yet soooo far away!
Old 10-04-2018, 06:38 PM   #1
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I'm so close and yet soooo far away!

I have been chucking along planning to retire in my 60s until I stumbled into these FIRE forums a few weeks ago. After reading through many of the threads and running my numbers through some of the simulators including Firecalc. I’m beginning to think I’m closer to FI than I initially thought. With that in mind, I’m planning my exit strategy. I have April 1, 2021 in mind and no later than 8/12/2021.

Here are some information that may be pertinent to my questions:

I’m 47, SO is 39 with 3 young children, 3, 8, and 10.
Salary: 140k SO 95k
Assets:
403b – 225k (100% stocks)
457b – 200k (100% stocks)
401k – 1320k (100% stocks)
Roth IRA – 30k (100% stocks)
Brokerage – 975k (100% stocks)
Total - 2750k
Remaining mortgage 370k 27 years remaining at 4.00%
Monthly expense including mortgage 8.75k
FIRE withdrawal – 125k/year (25k for HI)

FIRE preparation:
1. Get a better understanding of expenses by tracking
2. Look into long term tax planning
3. Update and home maintenance
4. Building kids education fund
5. New vehicle (A little hesitant on this. Want to see where the self driving technology is heading

Questions:
1. What do you think of the plan? Is it reasonable? Anything else I need to consider?
2. The 457b are in 2 separate accounts 140k and 60k. From what I read, 457b should not be rolled into an IRA. Any insights into this?
3. The 403b are in 2 separate accounts 145k and 80k. Is there any reason not to roll them together? Or should I roll them into an IRA?

Thank you for reading!
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Old 10-04-2018, 07:08 PM   #2
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Is healthcare and children’s education considered in the monthly spend? Why not pay off mortgage from brokerage acct to get debt free as well. Good luck!
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Old 10-05-2018, 12:07 AM   #3
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Nice savings at a relatively young age. Looks like you are getting close!


Your target withdrawal with savings to date seems fairly high at over 4.5% without SS (?). What is your target withdrawl rate when you actually retire? Maybe you can get below a 4% withdrawl if the market stays strong.



Most folks here are conservative and would probably recommend a withdrawal rate of less than 3.5%, even as low as 2% to 3% for such an early retirement. Young 30-40 somethings at Money Mustache talk about 4%-ish withdrawal, but also figure on w*rking or drastically cutting expenses in a down market. Not sure if this is realisic for you.

Is there much fat or discretionary in that budget? Could be vulnerable in the first 10-15 year to a sustained downturn; SS could be too far away to help out, especially since SO is much younger and your expenses are relatively high.


Have you figured in taxes? Do you have (early) retiree healthcare or looked at what 25K will buy on healthcare.gov? Check out the limited networks (compared to megacorp cadillac health), not just costs. ACA subsidies can help a lot since you can income manage with your heavy after tax holdings, but what if the subsidy disappear and you need to insure 5 bodies?


I get that you are all stocks. I was too, but now 60% stocks and 40% bonds/cash in retirement. I hate lazy money, but it helps me sleep at night.
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Old 10-05-2018, 03:25 AM   #4
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With less than 3 years to retirement, being 100% equities seems too risky. Do you have any 529 funds established? You are doing a great job saving and hopefully the markets cooperate and you can improve your position by 2021, but I'd be modeling a minimum of $3,500,000 as a goal plus some major headway toward whatever support for your kiddos college funding you plan to provide.


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Old 10-05-2018, 04:15 AM   #5
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Quote:
Your target withdrawal with savings to date seems fairly high at over 4.5%. What is your target withdrawl rate when you actually retire?

Most folks here are conservative and would probably recommend a withdrawal rate of less than 3.5%, even as low as 2% to 3% for such an early retirement.
This is how I see it as well. I would not do it until the WR is much lower.
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Old 10-05-2018, 07:03 AM   #6
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Great job unwittingly preparing for FIRE. Will you be receiving SS/pension in the future? If yes, have you included those expected cash flows in your FireCalc modeling? Based on the information you have provided (no mention of SS/pension), you seem to right on the edge for a 2021 retirement depending on if your $8.75k monthly spend could be reduced if needed.

Omalley
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Old 10-05-2018, 02:33 PM   #7
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Originally Posted by FI50 View Post
403b – 225k (100% stocks)
457b – 200k (100% stocks)
401k – 1320k (100% stocks)
Roth IRA – 30k (100% stocks)
Brokerage – 975k (100% stocks)
Total - 2750k
Welcome! Sometimes it's wonderously nice to be surprised!

DISTRIBUTIONS: In 2021 you'll be 50. From 2021, until you turn 59.5 is another 9.5 years. You can access your brokerage assets penalty-free prior to 59.5, but may need to use rule 72(t) to take SEPPs to access the tax deferred funds penalty-free to get there. I did not read how much you're adding annually to the investments. Assuming you make 7% annually for 3 years, and contribute half you salary, it looks like you should be in the ball park!
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Old 10-06-2018, 10:51 AM   #8
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Originally Posted by TNBigfoot View Post
Is healthcare and children’s education considered in the monthly spend? Why not pay off mortgage from brokerage acct to get debt free as well. Good luck!
Thank you for taking time to post.

Healthcare is considered in the expense post FIRE at 25k a year. It comes off the paycheck pre-FIRE, so it's not included. We do have 100k in an investment account for education that I did not include in the information. We don't have education in the expense item. Education funding is probably what will shift my FIRE plan. I figured we need to fund another 100k into the fund at 7% return, it may be sufficient to help the kids.

I'm pretty comfortable with not paying off the mortgage; however, DW is not as comfortable. I'm selling the idea of keeping 1.5 - 2 years worth of mortgage payment in some type of short term vehicle like cd ladder?
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Old 10-06-2018, 11:08 AM   #9
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Originally Posted by FreeBear View Post

Your target withdrawal with savings to date seems fairly high at over 4.5% without SS (?). What is your target withdrawl rate when you actually retire? Maybe you can get below a 4% withdrawl if the market stays strong.

Most folks here are conservative and would probably recommend a withdrawal rate of less than 3.5%, even as low as 2% to 3% for such an early retirement. Young 30-40 somethings at Money Mustache talk about 4%-ish withdrawal, but also figure on w*rking or drastically cutting expenses in a down market. Not sure if this is realisic for you.

Is there much fat or discretionary in that budget? Could be vulnerable in the first 10-15 year to a sustained downturn; SS could be too far away to help out, especially since SO is much younger and your expenses are relatively high.


Have you figured in taxes? Do you have (early) retiree healthcare or looked at what 25K will buy on healthcare.gov? Check out the limited networks (compared to megacorp cadillac health), not just costs. ACA subsidies can help a lot since you can income manage with your heavy after tax holdings, but what if the subsidy disappear and you need to insure 5 bodies?


I get that you are all stocks. I was too, but now 60% stocks and 40% bonds/cash in retirement. I hate lazy money, but it helps me sleep at night.
Thank you for taking time to post!

I have a 3.25% SWR in mind. I was hoping to get there in 2.5 years. I will get 20k @ 62 and DW will get 50k (SS and pension) at 62. I just started tracking expense about 2 weeks ago, so we shall see if there are fat to trim, I suspect there may be.

I have considered taxes. Heathcare is another matter though. I have read many of the post and consider many of the options, but still not very comfortable with it.

I still need to work on the allocation. At this point, I'm still thinking 90% stocks. I still need to read up on this to get my comfort level.
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Old 10-06-2018, 11:10 AM   #10
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This is how I see it as well. I would not do it until the WR is much lower.
Thank you for posting.

Totally agreed. 3.25% is where I'm comfortable. We will see where it stands in 2.5 years. It does not look good after some other considerations like education fund.
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Old 10-06-2018, 11:14 AM   #11
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Originally Posted by Omalley View Post
Great job unwittingly preparing for FIRE. Will you be receiving SS/pension in the future? If yes, have you included those expected cash flows in your FireCalc modeling? Based on the information you have provided (no mention of SS/pension), you seem to right on the edge for a 2021 retirement depending on if your $8.75k monthly spend could be reduced if needed.

Omalley
Thanks your for posting.

I will get 20k in SS at 62. DW will get 50k(SS+pension) at 62. I ran different scenarios with and with out SS/pension in FireCalc. The numbers indicate I'm on the edge.
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Old 10-06-2018, 11:17 AM   #12
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Welcome,
Feel free to join the Class of 2021 thread. You’re much better set than I was at your age. Congrats!
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Old 10-06-2018, 11:19 AM   #13
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[QUOTE=Golden sunsets;2119059]With less than 3 years to retirement, being 100% equities seems too risky. Do you have any 529 funds established? You are doing a great job saving and hopefully the markets cooperate and you can improve your position by 2021, but I'd be modeling a minimum of $3,500,000 as a goal plus some major headway toward whatever support for your kiddos college funding you plan to provide.

Thanks for posting.

Point well taken on the allocation. I do further research to see where I'm comfortable. I don't have a 529 account; however, I do have 100k in an investment account earmark for education that was not included in the information. I'm planning to add another ~100k to fund for education.
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Old 10-06-2018, 11:24 AM   #14
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Originally Posted by HNL Bill View Post
Welcome! Sometimes it's wonderously nice to be surprised!

DISTRIBUTIONS: In 2021 you'll be 50. From 2021, until you turn 59.5 is another 9.5 years. You can access your brokerage assets penalty-free prior to 59.5, but may need to use rule 72(t) to take SEPPs to access the tax deferred funds penalty-free to get there. I did not read how much you're adding annually to the investments. Assuming you make 7% annually for 3 years, and contribute half you salary, it looks like you should be in the ball park!
Thanks for posting.

Thanks for the information. I'm still reading up on the best approach for distribution. I remember reading somewhere that I can get a distribution from 457b without penalty also. I will need to read that again.

I also assume 7% return. Also adding about 95k to the portfolio each full year. Everything indicates I'm in the ball park. However the education may set me back another year.
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Old 10-07-2018, 03:28 AM   #15
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Hi FI50, nice savings at your age. Keep it up - I am at the same age as yours. I think you are within the ballpark for retirement early but 3 more years it could be a stretch. Will your view change if market downturn occurs within these 3 years?

I am more conservative in my planning so as my views. Here are my thoughts of two things you need to rethink before pulling the plug.
1) College funds: have you looked into how much it will cost for your kids's future colleges? I think even adding another $100K on top of what you have for education might not be enough. I have 3 kids also (12, 16, 17) with $500K saved up for colleges. Have gone through a few college visits both public (in-state and out-of-state) and private colleges and made me rethink.
2) Mortgage: a $370K mortgage could be one of the main source of your worry in your golden years. Have you considered downsizing when retire or paying off completely before FIRE?
Have you looked at different timeline scenarios such as 3 years, 5 years or 8 years from now?
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Old 10-07-2018, 09:04 AM   #16
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Hi FI50, nice savings at your age. Keep it up - I am at the same age as yours. I think you are within the ballpark for retirement early but 3 more years it could be a stretch. Will your view change if market downturn occurs within these 3 years?

I am more conservative in my planning so as my views. Here are my thoughts of two things you need to rethink before pulling the plug.
1) College funds: have you looked into how much it will cost for your kids's future colleges? I think even adding another $100K on top of what you have for education might not be enough. I have 3 kids also (12, 16, 17) with $500K saved up for colleges. Have gone through a few college visits both public (in-state and out-of-state) and private colleges and made me rethink.
2) Mortgage: a $370K mortgage could be one of the main source of your worry in your golden years. Have you considered downsizing when retire or paying off completely before FIRE?
Have you looked at different timeline scenarios such as 3 years, 5 years or 8 years from now?
Thank you for taking time to post and touch on the 2 points that I worried most with my plan, mortgage and education.

I would definitely review the plan if there is a downturn before FIRE. In a way I want a downturn to happen before FIRE. The last thing I want to see is FIRE and seeing a downturn.

1. In my excitement to FIRE before turning 50, I may have trimmed the education fund budget a little too much. I have looked online at the schools in GA both public and private. 25k - 50k/year is the numbers I'm seeing. Originally, I was funding 40k - 50k/year. I will fund the 40k-50k before FIRE.

It sounds like going through the process of visiting the schools you don't think that 500k will be enough to fund for 3?

2. We don't have any plans to move or downsize. If we adequately fund the 370k, I would feel pretty comfortable keeping the mortgage. However, DW would feel much better if we pay it off. We may(more likely) go toward that route.

I did run through different scenarios with different years. I looks more likely 5 years than 3.

By the way, that is a nice stash you have for the education fund. Where are you in term of FIRE? It looks like you are very close if not FIRE already!
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Old 10-07-2018, 09:10 AM   #17
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Welcome,
Feel free to join the Class of 2021 thread. You’re much better set than I was at your age. Congrats!
Thanks! After reading all the messages and info, I think I'm closer class of 2023 than 2021. I will run my numbers and see what makes sense.
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Old 10-07-2018, 11:47 AM   #18
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Thank you for taking time to post and touch on the 2 points that I worried most with my plan, mortgage and education.

I would definitely review the plan if there is a downturn before FIRE. In a way I want a downturn to happen before FIRE. The last thing I want to see is FIRE and seeing a downturn.

1. In my excitement to FIRE before turning 50, I may have trimmed the education fund budget a little too much. I have looked online at the schools in GA both public and private. 25k - 50k/year is the numbers I'm seeing. Originally, I was funding 40k - 50k/year. I will fund the 40k-50k before FIRE.

It sounds like going through the process of visiting the schools you don't think that 500k will be enough to fund for 3?

2. We don't have any plans to move or downsize. If we adequately fund the 370k, I would feel pretty comfortable keeping the mortgage. However, DW would feel much better if we pay it off. We may(more likely) go toward that route.

I did run through different scenarios with different years. I looks more likely 5 years than 3.

By the way, that is a nice stash you have for the education fund. Where are you in term of FIRE? It looks like you are very close if not FIRE already!
Yeah. At least one of my kids wants to go for higher than a BS degree and prefers higher cost school. I would rather overshoot the numbers to give them a little bit more room.
About mortgage, we had it paid off 10 years ago and it has been a piece of mind. Still not FIRE yet and still on hamster wheel for at least 2 more years when I can be eligible for retirement health insurance then will seriously think about pulling the trigger. Currently sit at $4.5M NW but still worry about health care - It is a bit of uncertainty in our plan. Oh, BTW how do you factor in health care in your plan?
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Old 10-07-2018, 03:17 PM   #19
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Thanks! After reading all the messages and info, I think I'm closer class of 2023 than 2021. I will run my numbers and see what makes sense.
Yes, go for 2023; then if it is sooner you get that great joy of moving to an earlier class!

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Old 10-08-2018, 03:28 PM   #20
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Yeah. At least one of my kids wants to go for higher than a BS degree and prefers higher cost school. I would rather overshoot the numbers to give them a little bit more room.
About mortgage, we had it paid off 10 years ago and it has been a piece of mind. Still not FIRE yet and still on hamster wheel for at least 2 more years when I can be eligible for retirement health insurance then will seriously think about pulling the trigger. Currently sit at $4.5M NW but still worry about health care - It is a bit of uncertainty in our plan. Oh, BTW how do you factor in health care in your plan?
Very well done on the $4.5M NW. As for healthcare, I looked at my company retirement healthcare plans that I will be eligible for at 55. However, the plans are very pricey due to an older population and is not subsidized. So, there is no considerations for me to stay just for that. DW will have access to to her State healthcare plans(active population). Their top plan will run about $22k in 2019. And, ACA plans will be around 6-12k depending on how well we plan our long term tax.
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